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Tkhilaishvili v. Torosyan

Superior Court of Massachusetts, Suffolk

August 13, 2018

David TKHILAISHVILI et al.
v.
Vahagn (Victor) TOROSYAN et al.

          File Date: August 14, 2018

          DECISION AND ORDER REGARDING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT (DOCKET NO. 29.0)

          Brian A. Davis, Associate Justice of the Superior Court

          This is a dispute over the parties’ agreement to organize and operate a new drug treatment clinic in Quincy, Massachusetts (the "Clinic") in 2014-2015. Plaintiffs David Tkhilaishvili ("David") and Jambulat "James" Tkhilaishvili ("James" or, collectively with David, "Plaintiffs") filed this action in April 2016 against defendants Vahagn "Victor" Torosyan ("Victor") and Allied Health Clinic, LLC ("Allied"), the entity formed by the parties to hold the assets of the Clinic, alleging, among other things, that Victor breached his fiduciary duty to Plaintiffs by improperly "stripp[ing] James and David of their membership interests, and remov[ing] them as managers" of Allied and Health Management Group, LLC ("HMG"), a related entity formed by the parties to manage the Clinic. Complaint (Docket Entry No. 1.0), p. 1. Victor has asserted a counterclaim alleging that James and David embezzled money from the Clinic, and later threatened to kill Victor and his family if Victor did not "surrender" a portion of his ownership interest in the Clinic and give up certain rights that Victor has under the written operating agreements for the Clinic and HMG. By means of his counterclaim, Victor seeks a declaratory judgment that he "appropriately utilized his authority under the operating agreements for the Clinic and HMG to remove James as managing member of the Clinic and David as managing member of HMG," and also to "declare David and James’ interests in the Clinic and in HMG forfeit" as a result.[1] Answer and Counterclaim (Docket Entry No. 16.0), ¶ 66.

         This action was filed in April 2016. In May 2016, David and James were indicted by a federal grand jury on charges of conspiracy to extort, attempted extortion, and healthcare embezzlement on account of their purported dealings with the Clinic and with Victor. This case was stayed for a period of time while those federal criminal proceedings were pending. After a jury trial in United States District Court in May 2017, David was found guilty on all counts and James was found guilty of conspiracy to extort and attempted extortion. David was sentenced to 36 months in federal prison in December 2017, and James received a sentence of 18 months in federal prison at the same time. Both David and James have appealed their convictions. As of the date of this decision, their appeals are still pending.

         The stay of this action was partially lifted by the Court in February 2018.[2] See Order on the Plaintiffs’ Motion for a Stay Pending Appeal (Docket Entry No. 26.0). In May 2018, Victor filed a motion for the entry of summary judgment in his favor on his declaratory judgment counterclaim. The gist of Victor’s summary judgment motion is that David and James’ recent convictions for conspiracy to extort and attempted extortion establish, as a matter of law, that Victor was legally entitled to remove David and James as members of Allied and to forfeit their interests in that entity pursuant to the terms of the Clinic’s operating agreement.[3] David and James oppose Victor’s motion for summary judgment on various grounds, including on the basis that Victor fraudulently induced them to enter into the version of the Clinic operating agreement that gives Victor the power to remove David and James as members and to forfeit their interests in Allied.

          The Court conducted a hearing on Victor’s motion for summary judgment on July 24, 2018. Both sides appeared and argued. Upon consideration of the written submissions of the parties and the oral arguments of counsel, Victor’s motion is DENIED for the reasons stated on the record at the hearing and summarized, briefly, below.

         Summary judgment is appropriate when, viewing the evidence in the light most favorable to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Mass.R.Civ.P. 56(c); Cargill, Inc. v. Beaver Coal & Oil Co., 424 Mass. 356, 358 (1997). Entry of summary judgment is not appropriate, however, "if anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be drawn in favor of the [nonmoving party]." Bowers v. P. Wile’s, Inc., 475 Mass. 34, 37 (2016) (added text in original, internal quotation marks and citation omitted).

         In this case, the Court agrees with Defendant that James and David’s federal convictions for conspiracy to extort and attempted extortion establish that Plaintiffs violated their fiduciary obligations to him as a matter of law.[4] Certainly James and David’s threats to kill Victor and his family fairly can be characterized as a breach of the duty of "utmost good faith and loyalty" that James and David, as fellow shareholders in Allied, owed Victor. See Merriam v. Demoulas Super Mkts., Inc., 464 Mass. 721, 726 (2013) ("Shareholders in a close corporation owe each other a fiduciary duty of the utmost good faith and loyalty") (internal quotation marks and citation omitted). The dueling affidavits submitted by the parties demonstrate, however, that there is a genuine issue of material fact as to the validity and enforceability of the Clinic operating agreement that Victor relies upon to justify his removal of David and James as members of Allied and to forfeit their interests in the LLC. More specifically, both David and James have submitted sworn affidavits which assert, in relevant part, that Victor fraudulently induced them to execute signature pages that Victor subsequently attached to a version of the Clinic operating agreement that was materially different from the version that Plaintiffs had agreed to. See Affidavit of David Tkhilaishvili Submitted in Support of Plaintiffs’ Motion for Preliminary Injunction, filed April 20, 2016, ¶¶ 19-29; Affidavit of Jambulat "James" Tkhilaishvili Submitted in Support of Plaintiffs’ Motion for Preliminary Injunction, filed April 20, 2016, ¶¶ 13-22. "It is black-letter law" in this Commonwealth that an agreement obtained through fraud "is voidable by a party who [was] fraudulently induced to enter into it." Green v. Harvard Vanguard Med. Assocs., Inc., 79 Mass.App.Ct. 1, 11 (2011). It also is well-established that "the question of fraud is not one of law, but one of fact for the jury." Matthews v. Thompson, 186 Mass. 14, 23 (1904) (internal quotation marks and citation omitted). Thus, the parties’ genuine dispute concerning the validity and enforceability of the Clinic operating agreement precludes the entry of summary judgment in favor of Defendant. See Mass.R.Civ.P. 56(c); Cargill, Inc., supra.

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Notes:

[1] The Clinic operating agreement provides, in relevant part, that the violation of a member’s "fiduciary duty of good faith and loyalty to the [Clinic] ... will be grounds for immediate removal as a Manager" of the same. See Statement of Undisputed Material Facts (Exhibit A to Docket Entry No. 32.0), ¶ 14. The Clinic operating agreement also provides the violation of a member’s "fiduciary duty of good faith and loyalty to the [Clinic] ... will be grounds for forfeiture of such Member’s entire interest" in the same. Id., ¶ 15.

[2] Following Plaintiffs’ convictions, the Court continued the stay with respect to any discovery that might implicate Plaintiffs’ Fifth Amendment rights, but lifted the stay on the filing of dispositive motions.

[3] Although Victor’s counterclaim requests a judicial declaration that he "appropriately utilized his authority under the operating agreements for the Clinic and HMG to remove James as managing member of the Clinic and David as managing member of HMG" (Answer and Counterclaim, ¶ 66 (emphasis added)), his current motion for summary judgment requests only a legal determination with respect to Victor’s actions involving the Clinic (i.e., Allied), not HMG. Motion for Summary Judgment by Vahagn Victor Torosyan and The Allied Health Clinic, LLC at 4.

[4] This is true even though James and David’s federal convictions currently are on appeal. See O’Brien v. Hanover Ins. Co.,427 Mass. 194, 201 (1998) (adopting "majority rule" that a "trial court judgment is final and has preclusive effect regardless of ...


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